China's New Oil Supplier

By
Richard Behar

When my plane smacks down in Equatorial Guinea — where if the captain misses the runway, you could end up in Cameroon — I become the first American journalist to visit this pint-sized republic (population: 550,000) in nearly three years. That was when Equatoguinean officials forced two American reporters to leave after they'd spent just a few days in Malabo, the capital, asking questions. One of them, Peter Maass, was booted for "spying" simply for walking down a street chatting with a European ambassador.

That kind of reception might seem harsh, given that Americans have long been the only foreigners privileged to enter this country without a visa and given the long-standing and cozy relationship between the two countries. But it's not journalists who are welcome here in Equatorial Guinea — it's oil workers.

E.G. is less a country than a corrupt, extended-family business that cooked up its own national anthem. And the American oil industry has been singing along for years, cuddling up as much as necessary (and with barely any competition) to Teodoro Obiang Nguema Mbasogo, the 66-year-old despot who has ruled this backwater since 1979. Smaller than El Paso, Texas, E.G. has nevertheless managed to get itself at or near the top of just about every shameful list in the world — from the most-censored countries (according to the Committee to Protect Journalists) to the most corrupt (Transparency International) to the worst places to do business (the World Bank). Geoffrey Wood, a business professor at the U.K.'s University of Sheffield and coauthor of The Ethical Business, concluded in his own 2004 study of E.G. that the country is a "criminal state" that matches or exceeds the "rapacity and brutality" of the Duvaliers' Haiti, Somoza's Nicaragua, and Batista's Cuba. Despite an economy with the highest average annual growth rate in the world (21%) since 2001, more than half of the population lacks access to potable water and electricity. The UN says E.G. shows the greatest disparity on earth between per capita income ($50,000, surpassed only by Luxembourg) and human welfare (most of E.G.'s citizens live on less than $1 a day).

"Economic numbers are not the best way to know a country," one of President Obiang's sons would later tell me. "We don't really have an economy here." There are no ATMs, virtually no banks, and no credit cards or foreign currency are accepted. There is also not a single bookstore or newspaper stand — since no independent media are permitted. Only 8,000 people have Internet access (monitored, of course). State-run radio broadcasts odes to Obiang — calling him the "country's God" who "has all power over men and things" — in between songs warning citizens they will be crushed if they speak out against the regime.

Obiang prefers to be called "El Libertador" (the Liberator). But locals privately call him and his cronies "Los Gordos" (the Fat Ones). The E.G. government takes in $4 billion a year in oil revenues and royalties, and yet just about every building of any size seems to be owned by the president's family or government ministers, who tend to be one and the same. One of Obiang's sons runs the forestry ministry and owns the country's only private radio station, as well as a rap-music company in Beverly Hills; he recently bought a $35 million house in Malibu. Another son is the power behind energy and mining. Obiang's closest security adviser is his brother Armengol. His brother Antonio is minister of defense. Obiang himself has two mansions in Maryland.

As in most well-run police states, there are few actual police officers in E.G., little street crime, and no beggars. But nobody smiles, either. The joke in town is that the president won reelection in 2003 with 110% of the vote (the figure was actually 97%). Criticism of the government is not tolerated, with political detainees routinely tortured over the years in the country's notorious Black Beach prison, once overseen by Obiang. Even snapping a photo can land you behind bars. As for comparing Obiang to his predecessor (and uncle) Fernando Macías Nguema — who is said to have lined up 150 of his political opponents in a soccer stadium and had them all shot while a band drowned out their screams with a rendition of "Those Were the Days" — a local health official shakes his head in disgust. "That's like comparing Dracula to a vampire," he says. "It will take 25 to 50 years for this country to change."

Comparing Obiang to the previous despot is like "comparing Dracula to a vampire."

The Fat Ones like to hang out at the Luna restaurant and casino (owned by Obiang's wife), as well as the gaudy new 36-room Hotel Paraiso (owned by Obiang's brother, the minister of national security, whose nickname means the "Guiding Spirit"). At the Paraiso, where a grim-faced waiter with desperate eyes and rotting teeth served me lunch, the marble lobby features disco-era decor and a gigantic painting of two people frolicking on a perfect beach — the only happy scene I saw during my stay. It's a cozy little neighborhood: The Paraiso is next door to the U.S. Embassy, which is across the street from a posh residence owned by one of the president's sons, which is catty-corner to the ExxonMobil complex. The only people I saw on the street were two Chinese men playing a desultory game of badminton.

With the Beijing Olympics bearing down fast, everyone from George W. Bush to Mia Farrow seems to be seizing the opportunity to bash China for doing big business in Sudan, where since 2003, government-backed militias have killed more than 400,000 people and displaced an estimated 2.5 million. And it's true that China buys two-thirds of Sudan's oil exports, while selling Khartoum weapons and defending it in the UN Security Council. But you don't hear any complaints in Washington or Hollywood about China's growing role in Equatorial Guinea. Nor will you.

My first discovery on Bioko Island (E.G. includes a bit of the mainland as well as Bioko, where Malabo is located) was that no American diplomat would see me, and the U.S. Embassy eventually stopped returning my calls. That almost never happens to American reporters in hazardous countries, let alone a one-horse town like Malabo (population: 96,000). But it soon became clear that my presence was more of an embarrassment to American interests than to E.G.'s leaders, who, with each passing year, seem to care less about what the rest of the world thinks of them.

Of course, until ExxonMobil discovered substantial oil there scarcely a decade ago, no one did care what happened in this diseased scrap of jungle, the only former Spanish colony in sub-Saharan Africa. But while E.G. may be a speck of a country, it sits at the heart of the Gulf of Guinea, where it has quietly become the sub-Sahara's third-largest oil exporter after Nigeria and Angola. It is also emerging as one of the most strategically vital places in the world for both the United States and China. As such, it provides a perfect platform for watching how the scramble for finite resources is unfolding. And even a short stay in E.G. reveals that things aren't exactly going our way.

"American companies here don't want people to know it," says a leading Western oil expert who has been working in E.G. for more than a decade, "but they are shitting about China." China is systematically challenging the American oil giants here — locking in exploration or supply contracts, winning rights to new oil fields, doing massive infrastructure development, even stepping up military supplies. (Not to be outdone, a private U.S. security firm won a contract last year — approved by the Pentagon — to train E.G.'s army and Presidential Guard. With so much U.S. investment on the ground, keeping Obiang well protected is apparently essential.) America remains E.G.'s dominant foreign investor by far, with $7 billion in cumulative direct investments over the past decade, and with ExxonMobil, Amerada Hess, and Marathon Oil leading the way. But if recent statistics are reliable, China has surpassed the United States as E.G.'s biggest trading partner, purchasing more than $2.5 billion of its oil a year. One morning at my hotel, I came down to find a huddle of dozens of Chinese oil explorers from state-owned CNOOC in the lobby, exuberant and ready for action. One confided to me that there were already thousands of Chinese in E.G., mostly in the construction sector. "We're just getting started," he added with a broad smile.

I had spent two months trying to set up a meeting with E.G.'s energy ministry prior to my arrival, but received no response. I was hoping for a tour of the natural-gas operations of Marathon, one of America's most socially responsible energy companies. Unfortunately, Marathon wouldn't even let its executives meet me in E.G. without the local government's blessing, and that never came. (I was referred instead to a local NGO that carries out antimalarial work for Marathon, a program that in four years has resulted in a 40% reduction in the number of children carrying malarial parasites on Bioko Island.)

As luck would have it, I did meet a Marathon oilman — Frank, I'll call him — seated next to me at the Paris Inn, a popular hangout for foreigners. Without a real press, these rendezvous bars (as the euphemism goes) are the only means of communicating in E.G. But "every bar has someone watching and reporting to the government," explains Frank, an American manager who has lived and worked in E.G. for years. "In this bar, that girl over there is the spy," he adds, pointing with his eyes to a bartender in a skimpy skirt. "She doesn't speak English, but this one over here does. That's why I sometimes cover my mouth when I'm talking."

I was constantly reminded while moving around Malabo that saying anything critical about the government can land a person in jail. Every oil worker here has a tale about colleagues whisked away in the night. "A few weeks ago, some expats mouthed off in a bar about corruption and the conditions of the locals," says a young man named Patrick, who works for Sealion Shipping. "They were put in the cooler [jail] ... to cool off their ideas."

Frank and I carefully swap business cards below the bar, and are soon whispering about the Chinese. "I see the State Department's briefings on E.G.," he says. "We've been warning [the U.S.] about the Chinese for years. But America is asleep. There are at least 5,000 Chinese here, and they are bribing their way to the oil. The locals joke that there will be more Chinese here than Equatoguineans soon."

China provided E.G. with a $2 billion credit line a year ago. But the barrier to entry here appears much lower than in the Congo, where Victor Kasongo and others seem to have driven a much harder bargain. True, an army of blue-uniformed Chinese laborers in E.G. is building what is known locally as Malabo II, a futuristic new capital that is rising from the jungle, stretching for miles. Obiang's pet project, it includes a louvered-glass headquarters for the state-owned radio and TV station, a gleaming oval home for the state-owned oil company, and an ostentatious blue-topped building set to house the prime minister's office. But there are no signs yet of hospitals, schools, and other services likely to help the average Equatoguinean. The project does call for 10,000 moderate-income housing units, but critics still insist that the whole thing is a misguided use of megafunds in a country that desperately needs a health-care system, housing, education, rural roads, and a reliable power supply — not to mention an oil refinery that could keep the price of gas low for the locals.

Frank told me that local officials have admitted to him that China sends convicts to E.G. to work as construction laborers — a charge I heard in several African countries. (In Zambia, an immigration consultant told me she has processed paperwork for hundreds of Chinese prisoners.) True or not, and China's government denies it, the construction workers in E.G. have recently been rioting like a chain gang. In April, a clash involving E.G.'s military left two striking Chinese contract laborers dead; 400 workers were sent home to China on two chartered flights. E.G. imposed a news blackout on its already-censored local media. "We don't want this kind of revolt in the country," an anonymous E.G. official told Reuters. "We do not want strikes in our country. We asked the Chinese ambassador ... to find other workers."

In 1995, the Clinton Administration shuttered the U.S. Embassy in Malabo partly out of concern about E.G.'s record of corruption and human-rights violations. But China's growing influence in E.G. prompted U.S. oil companies to persuade the Bush administration to reopen the embassy part-time in 2003, setting the stage for a Sino-American clash for African oil that could well become a hallmark of the 21st century. Two other events would then unfold that infuriated Obiang — and drove E.G. even closer to China.

The first was a bizarre coup attempt in early 2004 by British and South African mercenaries (and involving Margaret Thatcher's son, for whom E.G. officials issued an arrest warrant only in March). At the time of the plot, Obiang lashed out at the United States, the U.K., and Spain, and hinted at their involvement. The second offense to Obiang was a U.S. Senate report, released early the next year, accusing the now-defunct Riggs National Bank of Washington of turning a blind eye to corruption in its handling of 60 bank accounts — and hundreds of millions of dollars — for the Obiang administration, the bank's biggest customer.

Riggs paid the largest-ever money-laundering fine, but the case was an even bigger embarrassment for Obiang and the major U.S. oil companies. The Senate report provided a rare, and strikingly clear, view of how a modern dictator manages his country's wealth. The findings: big payments by U.S. oil companies to E.G. officials, their family members, or entities controlled by them; $13 million in cash deposited into accounts controlled by Obiang and his wife, Constancia; funds moving from Riggs to the offshore accounts of various ministers as well as the president's wife; hundreds of thousands of dollars from oil giants such as Chevron and ExxonMobil for the tuition and living expenses of the kids of powerful E.G. officials; suitcases with $3 million in cash being carried into the bank's Dupont Circle branch; $445,800 in property-rental payments from Hess and its Triton Energy subsidiary to a 14-year-old son of Obiang's.

It was, former U.S. ambassador John Bennett later lamented to a British writer, "about as sad a commentary as one could imagine on U.S. business." The Senate determined that more than $35 million of foreign-oil revenue had been wired to two secret offshore companies, with a chunk of it going into an account controlled at least partly by Obiang. But the choicest moment came when Michigan senator Carl Levin chewed the head off of Riggs's CEO at a public hearing. "How do you live with yourself?" Levin asked. Then, turning to senior executives from Hess, ExxonMobil, and Marathon, he said: "I've got to tell you, I don't see any fundamental difference between dealing with an Obiang and dealing with a Saddam Hussein."

Western oilmen in E.G. are in agreement that the country's best hope is Gabriel Nguema Lima, Obiang's 36-year-old son, who picked up an economics degree in Dallas and who seems determined to try and move the country out of its terrifying time warp. They root for Gabriel — today the most powerful official at the country's energy ministry — to eventually take the throne. But they fear it might go instead to his older half-brother, Teodorin, Obiang's son from the first of two wives, who is widely regarded as a hot-tempered lightweight and believed to be his father's favorite.

Gabriel spent two years badgering his father's government to approve what is now called Luba Freeport, a magnificent new port for the oil industry. Hess, ExxonMobil, and Marathon among others, have established new tax-free logistical bases at Luba — and Chinese companies may eventually move there too. A state within a state, Luba sits an hour's drive from Malabo's corrupt and congested older port, which the oil majors are now free to shun. Obiang's government holds a minority stake in the venture (with Gabriel representing it on the board), but the port is controlled and operated by Lonrho, a London-based public company. "It will become the Singapore of Africa," predicts Howard McDowall, the port's general manager. "There's no equivalent anywhere in West Africa." As Gabriel himself would later tell me, "Luba is the real Equatorial Guinea."

On the day I am to meet Gabriel, his tightly wound deputy, Juan Carlos Echuaca Paco, keeps me waiting for four hours — on a flowery 1970s-style couch in an otherwise bare room without water or a bathroom. I watch Chinese businessmen with knapsacks come and go. I had been told earlier in the week that Obiang had once kept oilman John Hess waiting a full day, so I eventually locate Paco and tell him I have lost all interest in meeting Gabriel. As I walk briskly into the parking lot, he chases after me, dialing his cell phone. Within minutes, I am magically seated next to his boss. "You need to learn more patience," Paco sneers.

Gabriel begins by complaining that the foreign press has long given E.G. an unfair rap. "You were probably expecting our country was not secure, like the Congo, and that people would be following you," says the president's son. "One has to realize that Equatorial Guinea is not perfect. A lot has been done right, a lot wrong. The worst thing is only to concentrate on what's wrong."

Gabriel is a soft and likable guy; he is slight, with a goatee, thin glasses, and tender, princely fingers. While his dad shuts down traffic in the entire city every time his endless motorcade passes — there are only two major streets in Malabo, after all — Gabriel drives his own Mercedes. While his father utilizes a large force of Moroccan guards (he doesn't trust the locals), Gabriel insists on moving about town without security. But for all his down-home chumminess, a testiness rises when the questions get uncomfortable. When I mention with a smile that there is no press freedom in his country, he utters a short laugh before swiftly changing the topic.

For all of Gabriel's Western manners, he has sharp words when I ask him to compare the West with China. "If you were in our shoes — a developing country, with not a lot of funds — and the Chinese come and will do for 3 what it costs 10 from others, what would you do?" he asks. "The Chinese listen better, and they understand that sometimes you need to make sacrifices for a future gain. They'll do a hydroelectric plant at half the price, and, in return, they get future projects. With U.S. companies, we feel more squeezed and squeezed. They just take the oil and do nothing else. Of course they are losing ground to the Chinese. The World Bank and the IMF also come. 'No, we don't need you,' the president says all the time."

In the wake of the Riggs debacle, E.G. keeps its oil money stashed away in Cameroon. Says Gabriel: "The president is asking all the time for assistance in managing the funds. To Justice [Department]. To State [Department]. They don't listen. They're very busy." As we finish up our talk, Gabriel takes a jab at the country's former colonial masters. "Do you notice that we're not speaking Spanish in the government? In the future, we will speak English, French — maybe Chinese."

President Obiang's sense of abandonment by the West — not to mention the coup attempt and the Riggs disaster — seems to have moved him to look East, where Senate probes don't happen and where mercenaries don't pile onto planes from Beijing. In late 2005, he visited China and, on his return, announced, "From now on, China will be our principal partner for the development of Equatorial Guinea." Then, expertly playing the two sides against each other, Obiang visited Washington in early 2006, where Condoleezza Rice welcomed him as "a good friend" of the United States. Within months of that visit — despite its annual reports portraying E.G. as a land of corruption, arbitrary arrests, scant human rights, and freedoms denied — the State Department installed its first resident ambassador in E.G. in 12 years. It even gave the okay to open a consulate stateside. In Houston.

But if Obiang remains a good friend to the United States, China has now outmaneuvered us once again. Last year, during a visit to E.G., China's foreign minister described his country as E.G.'s "best friend."